Citibank, Nat. Ass'n v. London

• Decision Date: 01 October 1981
• Docket Number: Civ. A. No. H-78-1531.
• Citation: 526 F. Supp. 793
• Parties: CITIBANK, NATIONAL ASSOCIATION, Plaintiff, v. Howard LONDON and Cynthia London, Defendants.
• Court: U.S. District Court — Southern District of Texas

526 F. Supp. 793

CITIBANK, NATIONAL ASSOCIATION, Plaintiff, v. Howard LONDON and Cynthia London, Defendants.

Civ. A. No. H-78-1531.

United States District Court, S. D. Texas, Houston Division.

October 1, 1981.

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Sidney Farr, Houston, Tex., for plaintiff. Howard London, pro se. Roy Beene, Houston, Tex., for defendant.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

Introduction

McDONALD, District Judge.

This is a breach of contract action by the plaintiff, Citibank National Association, against the defendants, Howard and Cynthia London, to recover the balance due on two written agreements executed in New York City on June 28, 1973. The plaintiff commenced this suit by invoking the diversity jurisdiction of this Court pursuant to 28 U.S.C. § 1332. The plaintiff alleges that the defendants have defaulted on debt payments due and owing under the terms of these agreements and that plaintiff is now entitled to judgment for the balance owed with interest. The defendants contend they owe nothing under the agreements in that the agreements were obtained by plaintiff through unlawful duress in which plaintiff coerced defendants into assuming a corporate debt. The defendants contend further that the plaintiff should be estopped from proceeding against them individually for recovery of a corporate debt. Finally, the defendants assert that the plaintiff's claim is barred by the statute of limitations. This action was tried without a jury. The parties submitted post-trial memoranda and proposed findings of fact and conclusions of law. After having considered the record, the testimony and demeanor of the witnesses, the exhibits, the arguments of the parties and the applicable law, the Court now enters its Findings of Fact and Conclusions of Law pursuant to Rule 52 of the Federal Rules of Civil Procedure.

FINDINGS OF FACT

1. Plaintiff, Citibank, National Association, is a national banking association organized under the laws of the United States commonly known as the National Banking Act. It is located in the City and State of New York.

2. Defendants Howard London and Cynthia London, who are married to one another, are both citizens of the State of Texas.

3. This is a breach of contract action by the plaintiff, Citibank National Association, against the defendants, Howard and Cynthia London, to recover the balance due on two written agreements executed in New York City on June 28, 1973.

4. One of the agreements, in question, is entitled "Affidavit of Confession of Judgment" and is signed by both defendants. The other agreement is entitled "Stipulation" and is signed only by Howard London. Although the stipulation was not notarized, Howard London acknowledged the authenticity of his signature at trial.

5. When these written agreements were executed, the plaintiff was known as First National City Bank. Subsequently, but before this action was filed, First National City Bank changed its name to Citibank, National Association. For purposes of these Findings and Conclusions, the plaintiff will be referred to as either "Citibank" or "the bank." The defendants, Howard and Cynthia London, will be referred to individually as "Mr. London" or "Mrs. London" and jointly as "the Londons."

6. Briefly, the agreements state that the Londons received $55,182.79 from Citibank as a result of overdrafts on certain checking accounts maintained with the bank and controlled by the Londons, no part of which had been repaid on June 28, 1973.

7. The checking accounts on which the overdrafts occurred were maintained at Citibank by two companies owned and controlled by Mr. London. The names of these companies were Innographic Industries, Inc., and Atlex Industries, Inc. Mr. London was the president and sole stockholder of both corporations. The corporations were operated on an informal basis and maintained no board of directors. Mrs. London did not participate in the operation of the corporations. Neither one of these corporations is a party to this law suit.

8. Innographic, Inc., and Atlex, Inc. had a history of overdrafts on their Citibank checking accounts. The bank typically would cover these overdrafts for a few days, after which sufficient funds would become available to cover the checks. This practice was never officially approved by Citibank.

9. During June and July of 1972, Innographic, Inc., and Atlex, Inc. had a sharp increase in the amount and frequency of their overdrafts. During these two months, Citibank covered overdrafts in the amount of $55,182.79 on these corporate accounts.

10. The overdrawn accounts were referred to Arthur Lloyd, a vice president of Citibank, for collection. Mr. Lloyd utilized the services of a private investigator, Mr. McBride, to assist him in this matter.

11. Mr. Lloyd first met Mr. London in July of 1972. Mr. London attempted to reimburse the bank for the overdrafts, in question, by writing a check against an account he maintained at a bank in New Jersey. This check, however, was returned against uncollected funds. Consequently, the overdraft at Citibank was never covered.

12. In late July 1972, Mr. Lloyd referred this matter to the District Attorney of Queens County, New York. This referral was consistent with the bank's policy on collections.

13. In early August 1972, Mr. London's personal attorney met with Arthur Lloyd at Lloyd's office to generally discuss a settlement of Citibank's civil claim based on the overdrafts. Mr. London's attorneys proposed a settlement of $5,000 to be secured with a second mortgage. The bank rejected this proposal because it wanted more money up front. The evidence is unclear as to whether these discussions pertained only to the corporate accounts or whether they also pertained to Mr. London's personal account.

14. The evidence revealed that in January 1973 Citibank became suspicious that the Atlex Industries, Inc. account might have been involved in a "check kiting" scheme. (Plaintiff's Exhibit No. 4)

15. In March of 1973, a Queens County, New York, grand jury indicted Mr. London, Atlex Industries, Inc. and Innographic Industries, Inc. as joint defendants for grand larceny and issuing bad checks in connection with the overdrafts described above for the period of on or about July 7-July 19, 1972. Mr. Lloyd testified before that grand jury in late February 1973. Prior to this indictment, the bank never made any representation to Mr. London that they would seek an indictment.

16. Pursuant to the grand jury's indictment, Mr. London was arrested sometime in March 1973. On that same day his wife posted bond and he was released.

17. Mr. London's attorney continued settlement negotiations with the bank after the indictment was issued.

18. In April of 1973, the District Attorney of Queens County contacted Mr. Lloyd to inquire whether Citibank would object to a dismissal of the indictment against Mr. London, if Mr. London offered restitution of the underlying debt which the bank sought to collect. Consistent with an informal company policy, Mr. Lloyd responded to the inquiry by saying any dismissal of the indictment would be within the sole discretion of the District Attorney's office.

19. Although Mr. Lloyd had no further personal contact with the Queens County D.A. after that April phone call, Mr. McBride apparently communicated with the D.A. subsequent to this time: these communications would not have been at Mr. Lloyd's direction.

20. Citibank never attempted to recover all or part of the $55,182.79 in overdrafts from the assets of Innographic Industries, Inc. or Atlex Industries, Inc. Virtually no evidence was introduced to establish whether or not these corporations had assets from which Citibank could have recovered all or part of the indebtedness. Citibank held no collateral pledged by Innographic, Inc., and in July 1973 there was a foreclosure sale of Innographic's assets. These assets, however, were distributed to secured creditors, of which the plaintiff was not one. Pursuant to subsequent bankruptcy proceedings Mr. London was held liable for certain debts of his corporation.

21. Citibank never filed any civil charges against either Innographic, Inc., Atlex, Inc., or Mr. London, until this action was brought against the Londons.

22. In a letter dated May 31, 1973, Arthur Lloyd forwarded photocopies of the statements of accounts for Atlex Industries, Inc. and Innographic Industries, Inc. to Mr. London's attorney, Mr. Kirschner. In that letter Mr. Lloyd advised Mr. London's attorney that the bank expected to receive restitution (Defendants' Exhibit No. 3).

23. The trial testimony established, and the plaintiff so acknowledged, that Mrs. London had no communications with Mr. Lloyd, or any other Citibank representative. Mrs. London testified, and the Court so finds, that she knew nothing about the underlying facts which resulted in the check overdrafts; Mr. London had merely informed her that he was experiencing trouble covering checks. Mrs. London only became aware of the serious nature of the check overdrafts when Mr. London was arrested in March 1973.

24. Mr. London's scheduled arraignment on the March 1973 grand jury indictment, was June 28, 1973.

25. On or about June 27, 1973 Mr. London and his attorney met with Arthur Lloyd at the office of Mr. London's attorneys, for the purpose of negotiating a final settlement of Citibank's civil claim for the overdrafts. The final written draft of the settlement consisted of the "Affidavit of Confession of Judgment" and the "Stipulation." These settlement papers were originally drafted by Mr. Lloyd and later revised by Mr. London's attorney. These instruments were executed on June 28, 1973.

26. The "Affidavit of Confession of Judgment," hereinafter "the affidavit," states that during June and July of 1972 the Londons received from First National City Bank, $55,182.79 as a result of overdrafts in certain checking accounts maintained with plaintiff and...